Henry Scott, Karen B Wong and Miguel Duran | Milbank
All questions
In US project finance transactions, the historical preference of lenders is to have the financing documents governed by the law of New York State and to require borrowers and other counterparties to financing documents to consent to the jurisdiction of the courts of New York. The comparatively straightforward issues raised in disputes involving loans and other credit facilities have been viewed as rendering those disputes more suitable to judicial, as opposed to arbitral, determination.
Nonetheless, US courts follow the strong policy in favour of arbitration to enforce agreements that have elected arbitration. There are a number of project documents that provide arbitration as the avenue for settling disputes. Parties choose from a large variety of institutions and rules, or ad hoc arbitration under rules of the parties’ own design. Arbitral proceedings can be tailored by contract to modify the institutional rules and meet the specific needs of the particular transaction. Parties in US transactions typically designate the American Arbitration Association for their project finance disputes, and frequently choose New York as the place of arbitration.
The United States is also a party to the 1958 New York Convention and the 1975 Inter-American Convention on International Commercial Arbitration, which requires courts of contracting states to give effect to private agreements to arbitrate and to recognise and enforce arbitration awards made in other contracting states. Other enforcement mechanisms are available, including multilateral treaties, bilateral friendship, commerce and navigation treaties, and traditional principles of comity among nations.